The pound was little changed against the dollar and euro, taking a breather following an extraordinary start to the week that saw an emergency hefty interest rate cut from the Federal Reserve and a plan by the U.S. government to rescue ailing bond insurers taking shape.

"Investors remain unconvinced as of yet as to the efficacy of what can be seen," said Simon Derrick, head of currency research at Bank Of New York Mellon.

"That probably means that risk aversion continues and so from a foreign exchange perspective that means more downward pressure on things like sterling/yen and the yen crosses."

Sterling fell 0.7 percent against the yen to 207.35 yen <GBPJPY=R > by 0849 GMT. But it was little changed at $1.9554 <GBP=>, well off a 10-month low of about $1.9335 set on Tuesday, while the euro was flat at 74.76 pence <EURGBP=>.

European stocks surged in early trade, following gains in Asia and Wall Street after news of a meeting between New York regulators, bond insurers and their customers lifted optimism that billions more in credit losses can be prevented.

The FTSEurofirst 300 index of top European shares rose 4 percent.

The pound has fallen sharply this year as a flow of negative news on the UK economy bolstered expectations that interest rates will fall by as much as 100 basis points by the end of the year.